By K.Steiner-Dicks on Sep 22, 2014

A: Large institutional investors are increasingly looking at big infrastructure projects. However this is a fairly new area for them. Therefore, they are still risk averse and have two key things that they are looking for – stable long term policy environments and a proven track record. In particular national policy across the European Union to support renewables has had a turbulent few years with changes to support structures like Feed in Tariffs. On both policy and track record it is likely to be difficult for tidal projects to compete at present although this is likely to change quite quickly over the next 5 years.

Q: Earlier this year a report wasprepared for the UK’s ICF spending departments--Delivery options for the International Climate Fund. Do you believe anything came out of that report that impacted or could impact future tidal project funding? Please explain.

A: Potentially, but unlikely to be significant in the next 2 or 3 years. The main reason for this is that the report specifically focussed on the international climate fund – which will only invest in emerging and developing countries. A key element of the report is focussed on how the UK’s ICF can help leverage and deliver scaling up opportunities with private sector investment.

Therefore, over the medium term there could be a big impact as markets for energy infrastructure that require significant up front capital expand and develop a track record.

Over the immediate short term it is likely that ICF funding will look for large quick win projects which are more likely to be wind, solar, hydro or geothermal. Tidal is more likely to be exploited in developed countries in the first instance. I could be wrong of course and the right proposition in a developing country could take advantage of the increasing focus on deploying capital into climate change solutions.

Q: Now that some tidal turbines have been proven fit in harsh environments in the UK, what do you believe is holding projects or funding back, compared to say, offshore wind projects?

A: Good question. There are some very large projects proposed but uncertainty over political commitment does make investors more wary. Offshore wind also started to take off prior to the financial crisis and so investment into infrastructure projects may have been easier. Post financial crisis it is still unclear exactly what the impact of new financial regulation will have on long term infrastructure projects so new technologies (even proven ones) will find it more difficult until the market sorts itself out.

Q: The UK and wider EU have very ambitious climate change and sustainability goals. Do you believe those target dates are in fact inhibiting good projects from being constructed, due to unrealistic time frames for project completion? Have you witnessed this?

A: No. I haven’t witnessed this or heard anyone express it as an issue. In fact I have heard people say the opposite – the fact that the EU has not taken up the higher targets that it says it will with an international agreement means that only the low hanging fruit in climate solutions (energy/industrial efficiency and some renewables) are being implemented. The higher targets needed to really drive new technologies into the market at scale, alongside the underpinning policy that this would necessitate, are currently not there so there is still investor uncertainty about when and where to put their capital. 

Q: What do you hope to get across to energy policy makers and/or pension funds during your time at the Institute when it comes to tidal power?

For the UK, in particular tidal, and other offshore technologies, should play a significant role in our future energy generation. If we focus on the twin challenges of energy security and climate security then they have to play a role. The key thing that needs focus is ensuring the right policy framework and capacity within pension funds to make investments into capital infrastructure projects. This should be an ideal investment for long term institutional investors.